Mortgage applications increased 2.8% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending August 22, 2014.

The Market Composite Index, a measure of mortgage loan application volume, increased 2.8% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2% compared with the previous week.

“Buyers made a late summer push, in this season that never reached its full potential. More homeowners also refinance last week, taking advantage of these historically low rates that won’t be around forever,” said Quicken Loans vice president Bill Banfield. “Nearly a million more homeowners can still benefit of the HARP program, but their opportunity will be fleeting when rates start rising.”

The Refinance Index increased 3% from the previous week. The seasonally adjusted Purchase Index increased 3% from one week earlier. The unadjusted Purchase Index increased 1% compared with the previous week and was 11% lower than the same week one year ago.

The refinance share of mortgage activity increased to 56% of total applications, the highest level since March 2014, from 55% the previous week. The adjustable-rate mortgage share of activity remained unchanged at 8.0% of total applications.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.28% from 4.29%, with points decreasing to 0.25 from 0.26 (including the origination fee) for 80% loan-to-value ratio loans. The effective rate remained unchanged from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.22% from 4.18%, with points increasing to 0.28 from 0.23 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.98%, the lowest since June 2013, from 3.99%, with points increasing to 0.13 from 0.03 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.47% from 3.44%, with points increasing to 0.34 from 0.30 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

Realtor.com is touting data from July showing that, by its metrics, July shows the best price appreciation and inventory increases hit during the peak spring buying season in three years.

It’s been a rough year for housing overall, but realtor.com’s national housing trend survey says that from April to July, price and inventory increases continued their upward trend untouched by external economic factors.

“In July 2012 and 2013, we saw external economic factors overwhelm the healthy gains established in the housing market during the spring home buying season,” said Jonathan Smoke, chief economist for realtor.com. “This year, we’re ending the traditional season with high buyer and seller confidence demonstrated by price appreciation, increases in inventory and quick home sales.”

Click the graphic to enlarge.

Realtor.com’s July 2014 national housing data reveals homeowners are more optimistic about selling than in previous years.

This month, the number of homes on the market increased 2.3% compared with last year and increased 4.5% over June. One factor fueling this uptick in inventory is a strong 7.5% increase in median list prices year-over-year.

Despite higher prices and more homes on the market, buyers are snatching up properties faster than last year. Median age of inventory for July 2014 is 82 days, three days faster than 2013.

“This is the first time, since the beginning of the recovery, that we expect to see positive momentum throughout the second half of the year,” Smoke projected. “While seasonal patterns are emerging in July month-to-month comparisons, all other metrics point to fundamental market health and a build-up of momentum.”

While July growth may seem modest, it is in stark contrast to the housing indicators experienced over the last two years. In April 2013, mortgage interest rates began to increase significantly, making potential mortgage payments more expensive for homebuyers.

By July 2013, this slow but steady tightening of homebuyer budgets dampened demand. As a result, month-over-month increases in inventory lessened and properties spent more time on market.

In July 2012 concerns of broad debt defaults and economic weakness in Europe influenced big decreases in the stock market. Overall economic uncertainty contributed to weak consumer confidence, which influenced potential homebuyers to remain on the sidelines while low prices made owners reluctant to list.

As a result, July 2012 median list prices remained flat both month-over-month and year-over-year. Inventory remained at very low levels and homes spent 102 days on the market.

San Diego County’s housing market led the nation in price appreciation in February, as the region moved out of its annual holiday homebuying lull.

The S&P/Case-Shiller Home Price Index showed Tuesday that from January to February, prices on the index rose 1 percent, highest on the 20-city measure. Prices declined over the month in 13 of the cities included on the closely-watched index.

“There’s a fundamental housing shortage in San Diego County, it’s that simple,” said Mark Goldman, a loan officer and real-estate lecturer at San Diego State University. “We have a strong housing market in San Diego as a result of a shortage. We have demand and a robust economy compared to a lot of other communities.”

The index, which lags two months, measures repeat sales of single-family homes. From February 2013 to February 2014, San Diego home values are up 19.9 percent, trailing only San Francisco and Las Vegas in annual appreciation.

Still, Goldman said he sees the local market continuing to slow, perhaps down to its historical 3 to 3.5 percent annual appreciation level.

The slowing seems to have started. For instance, the index rose from 163.28 in January 2013 to 194.07 in October, hovering around that total the rest of the year. In February 2014, it reached 196.97, highest since it was 197.45 in January 2008, but on the decline in the Great Recession.

Goldman said now that values of recovered, the market is adjusting to a new normal.

“We’re starting to see shifts in different consumption habits of homebuyer,” he said. “We’re seeing a lower desire to jump into the housing market, we’re seeing slower household formation, people are living at home longer, people are pooling resources instead of running out and jumping into that house. People are much more careful about their home-buying decision.”

David Blitzer, chairman of the index committee at S&P Dow Jones, also said despite price gains in much of the country, the market is slowing. That’s exemplified by fewer sales, housing starts, and the fact that home prices haven’t made it back to their 2005 levels. Blitzer also notes that mortgage rates have remained steady since they jumped last May, hitting affordability amid concerns over consumer confidence and tighter qualification standards.

“Five years into the recovery from the recession, the economy will need to look to gains in consumer spending and business investment more than housing,” Blitzer said in a statement. “Long overdue activity in residential construction would be welcome, but is certainly not assured.”

The average rate for 30-year-fixed mortgage in February was 4.3 percent, up from 3.53 percent in February 2013, Freddie Mac reports.

DataQuick, another real estate tracker, reported in February that San Diego County’s median home sale price was $410,000. It rose to $427,000 in March.

Las Vegas had the highest year-over-year gain on the index, at 23.1 percent, while San Francisco was second with 22.7 percent appreciation. Both were about flat from January to February. In Cleveland, where prices declined 1.6 percent from January to February, annual appreciation was 3 percent, slowest on the 20-city index.

Compared to the 1980s, when mortgage rates hovered above 10%, today’s rates remain relatively low. In early May, the 30-year, fixed-rate shot up to 4.46%, before settling back to 4.29% last week, according to Freddie Mac.

However, the recent pace at which they’ve been climbing has many potential homebuyers hesitant to buy a home.

At the end of June, right after rates rose sharply, Trulia($33.12 -0.2%) surveyed more than 2,000 people to see what their biggest worry would be if they were to buy a home this year.

Of all the consumers surveyed, 41% said their top fear is that mortgage rates would rise before they could actually buy a house. Second to rates, 37% of consumers said they were worried prices would rise before they could buy, and 36% said they wouldn’t find a home for sale that they like.

So how high will rates have to get before consumers become too discouraged to buy a home? Among consumers who intend to buy a home someday, 13% said that mortgage rates of 4% were already too high for them to consider buying a home. Rates had already climbed to 4% at the time of the survey.

Another 20% of consumers surveyed said they’d be discouraged from buying a home if rates reach 5%, while another 22% said they’d be discouraged from buying a home if rates reach 6%. Combining these groups, 56% of consumers who plan to buy a home someday would be discouraged from doing so if rates reach 6%.

But are consumers right to worry about the effect of mortgage rates on housing costs? According to Trulia, yes. Higher rates will raise the monthly mortgage payment for a loan.

For example, with rates at 3.35%, the monthly payment on a $200,000, 30-year FRM is $881. However, once rates hit 4.46%, that payment jumps to $1009 — a jump of 14% in the monthly mortgage payment.

“This means a consumer can afford less house for a fixed monthly payment, which – all else equal – should reduce housing demand and home prices in the long term. In the short term, however, if consumers expect rates to rise further, some might rush to buy, which could boost sales and home prices temporarily,” said Jed Kolko, chief economist at Trulia, in a report.

Surprisingly, the recent run-up in rates has not greatly affected prices or home-purchase mortgage applications as of yet. According to the Trulia Price Monitor, asking prices only rose 1.5% month-over-month in June. Additionally, the Mortgage Bankers Association index for home-purchase mortgage applications in June rose 2% month-over-month.

“With price gains still going strong, there are few signs that the rise in rates will derail the housing recovery,” said analysts atCapital Economics.

So why has the effect of rising rates on the housing market been limited thus far? Mortgage rates are rising alongside a strengthening economy, which is subsequently boosting housing demand. And while demand is on the rise, a tight inventory is forcing many would-be buyers to wait to buy.

Additionally, rising rates could lead to expanded mortgage credit, as refinancing demand dries up. Banks might look to expand their home-purchase lending to replace the refinance activity they have lost.

Barry Habib, chief strategist with Residential Finance, said he’s never experienced anything like what is seen here.

“In fact, it’s the largest percentage rise in interest rates and as rapid a period as we’ve seen in 53 years.”

Habib said he’s seen purchase activity drop slowly. When we see a normal lull is in July’s numbers. September’s numbers will be more telling, he said.

But demographics remain strong. The case for buying a home has never been stronger, with rent rising and affordability near its all-time best.

“You can make a strong case that housing should be strong moving forward,” he said. Habib noted that affordability is still 1% below the average for the past 10 years and 2% below what it’s been for 20 years.

Matt Weaver, senior mortgage banker at WCS Lending, told HousingWire that the main effect he’s seeing from the rise in rates is an increased sense of urgency.

“The interest rate increase hasn’t affected any homebuyer that I’m dealing with at this point in time,” said Weaver. “Has it affected their amount of monthly payments? Certainly. But it hasn’t taken them out of the game.”

He added, “Because it happened so fast, it almost didn’t even allow enough time to think about ‘should I pull back and not look for a home?'”

Weaver said May 22 marked the start of the rate volatility. In fact, the mortgage banker said for the first two weeks in June, if he had a client come in to make a mortgage application in the morning, he would have to increase the interest rate on the application by the time the process was finished nearly an hour later.

Luckily, Weaver said he had not seen a transaction as of yet to where an interest rate stood in the way of making the purchase.

“Going forward, from some of the studies that I read, I think that rates are going to take a much more gradual approach as opposed to this erratic behavior we’ve been seeing,” he said.

The past several years have certainly been turbulent times for the real estate industry. Home prices are the lowest they’ve been in decades making home ownership very enticing. When it comes time for a family or individual to consider purchasing their first home, there are many options to consider. The choice of whether to buy a house or a condo is a complicated decision that a new homebuyer will have to contend with. Both houses and condos have their respective advantages and disadvantages and it is ultimately up to the individual to decide which choice woudl suit them best. Let’s discuss the main positives and negatives of each option. Read more of this post